The VP has already blogged his own highly plausible theory. Just like back in the eighteenth century, extraordinarily high taxes on tobacco have nurtured an extensive black market. And as before, this market has been supplied principally by smugglers bringing in untaxed stock from overseas.

No, what's driving this is that organised criminal gangs have found ways of obtaining large quantities of cigarettes and tobacco without paying duty at all.

Of course, some is counterfeit. But much is the genuine article, manufactured and branded by the big international tobacco companies, and reportedly sourced from their legitimate factories in countries such as Ukraine. Here's a graphic summarising one estimate:

Obviously, the customs authorities all over the EU are working to clamp down, and over the last few years, HM Revenue and Customs have stepped up their efforts significantly. Quite right too.

But every success means that black market distributors in pub carparks and bootsales across the country find themselves short of product. So as the VP points out, the market has come up with a neat solution - stealing from legitimate suppliers here in the UK.

We've blogged the black market in tobacco before (eg here and here). Fundamentally, with tax now accounting for three-quarters of the price of cigarettes, even normally law abiding folk like the parson and the clerk can convince themselves such taxes are onerous and unnatural, and that it's reasonable to resort to the black market. After all, it isn't as if the black market is real crime, like murder or something.

We have moved beyond the realms of workable taxation. High taxes become the excuse for criminality.

And tobacco is such a great product for criminals. It's both light and high value (cf the mobile phones used in VAT carousel fraud). In one recent case, customs officers "found 74,000 cigarettes in the luggage of a Newcastle couple travelling from the Canary Islands". Something that easy to smuggle is very difficult to stop.

So what to do?

Well, since Tyler doesn't himself smoke, he strongly supports taxing smokers to buggery. Let 'em pay, says Tyler - less taxes for the rest of us to stump up.

But as we can see, that approach has opened the gates to a crimewave. And whatever the buyers of black market ciggies may tell themselves, it's not a victimless crimewave - just ask the VP and his family.

Worse, the black market in tobacco is just one part of Britain's burgeoning black economy. As we blogged here, most serious estimates have put the size of our black economy at 10% of GDP or more. But those estimates were made pre-recession and pre-Polish plumbers. Our guess is that it's now much bigger, and our forthcoming tax hikes will make it bigger still.

Which is very worrying.

High taxes fuel the black economy.

And the black economy fuels crime.

Yet another reason why Cam and Oz need to get a lot more serious about cutting spending rather than raising taxes yet further.

BOM the book now available

Drawing on six years of blogging government waste, this book shows how we spend far more than we need on our public services. It sets out the facts and explores the underlying issues. Just why does government spend so much and deliver such second rate service? Why do we put up with it? And what are the alternatives?

ABOUT BOM

Despite all the talk of cuts, government still consumes nearly half our national income. Yet many tens of billions of its spending is wasted, with taxpayers made to pick up the tab for a depressing array of overpriced sub-standard services. This is money we can no longer afford, and our National Debt is already at danger level.

If we're to avoid further decades of stagnation and austerity we urgently need to find another way. Exposing and understanding the wastefulness of government is a necessary step in the right direction.